7 Unexpected Benefits of Delaying Retirement

Two women working
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Has there ever been a better time to postpone retirement? In fact, the number of older workers has been on the rise since at least the mid-1990s, according to the Bureau of Labor Statistics.

Here are several unexpected benefits of delaying retirement:

1. You get to do meaningful work

Seniority comes with perks. Older workers often can set their own hours and apply their own ideas to their work. In short, work can feel more rewarding for these seniors.

2. You have more social interaction

Work — unless it’s fully remote — provides a built-in social network and an environment where you often have to talk to someone about something.

Maintaining friendships after retirement certainly isn’t impossible, but it’s not automatic, either.

3. You can align with your spouse’s retirement

Having one spouse retire while the other is still working can require compromise along with changes in budgeting, schedules and household responsibilities.

Continuing to work until both are ready for retirement means more time to make plans and set equitable expectations.

4. You have more time to transition

A sudden shift to no longer doing something you’ve done for 40 years or longer is jarring. You need to adjust to a whole new routine, find ways to fill your time and decide what now matters to you.

Continuing to work, even part time, provides the opportunity to think through these issues and consult retiring peers about the ways they’re navigating the transition.

5. You have fewer retirement years to finance

Working longer means you’re closing your retirement gap in two ways at once. First, you’re reducing the number of years when you will have to finance day-to-day life without work income.

Second, you’re turbo-charging your retirement savings at the time it’s easiest to do so. With any luck, your kids are grown up and hopefully more financially independent, and your earnings are growing faster than those of younger workers.

In addition, you’re allowed to tuck more away for your nest egg. People over age 50 have higher annual retirement contribution limits thanks to what the IRS calls “catch-up contributions.”

6. You can postpone 401(k) withdrawals

You generally must start making withdrawals from most types of retirement accounts the year you turn age 72. These mandatory withdrawals are called “required minimum distributions” or RMDs.

However, there is a notable exception for defined-contribution retirement plans like 401(k) plans. If your 401(k) plan allows for it, you may be able to postpone your RMDs without penalty until you retire, regardless of age.

That would mean more time for your investments to grow, and more time to avoid paying taxes on them.

7. Your Social Security checks will balloon

You can claim Social Security as early as age 62, even if you’re still working. But your monthly benefit will be smaller than if you wait longer to claim it.

If you claim benefits before your full retirement age, you suffer a permanent 30% cut to each month’s benefit amount. But every year you wait beyond full retirement age, up to age 70, earns a permanent 8% boost in those payments instead.

The reductions are based a formula that’s meant to be actuarially neutral, paying out the same total amount of benefits over the course of your retirement regardless of the age at which you first claim them.

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